Spirit Airlines Files for Chapter 11 Bankruptcy Amid Mounting Losses and Merger Fallout

Spirit Airlines, the largest budget carrier in the U.S., filed for bankruptcy protection on Monday, marking a significant development in the company’s years-long financial struggles. According to EuroNews, the airline has been reeling from the combined impact of the COVID-19 pandemic and an unsuccessful merger, both of which have contributed to a staggering loss of more than $2.5 billion (€2.4 billion) since 2020.

Per court filings, Spirit has listed assets and liabilities in the range of $1 billion (€950 million) to $10 billion (€9.5 billion), indicating the scale of its financial distress. The company has, however, assured passengers that its operations will remain uninterrupted during its Chapter 11 bankruptcy process. “The most important thing to know is that you can continue to book and fly now and in the future,” Spirit CEO Ted Christie said in a letter to customers, affirming the airline’s commitment to maintaining service amid restructuring.

According to EuroNews, Spirit’s bankruptcy filing follows a steady decline in its stock value. On Friday, shares of Spirit dropped by 25% after reports surfaced in The Wall Street Journal that the airline was negotiating with bondholders on possible terms for a bankruptcy. This drop added to a much larger downturn in Spirit’s stock, which has lost 97% of its value since late 2018, when the airline was still profitable.

Read more: JetBlue and Spirit Airlines Push Back on Law Firms’ Bid for Legal Fees in Abandoned Merger Case

The company has reportedly reached an agreement with its bondholders to secure financial support during restructuring. The deal includes a $350 million (€332 million) equity injection along with $300 million (€284 million) in debtor-in-possession financing, aimed at stabilizing operations as Spirit addresses its mounting debt obligations.

CEO Ted Christie confirmed in August that the company was prioritizing discussions with advisers and bondholders regarding upcoming debt maturities. “We are focused on refinancing our debt, improving our overall liquidity position, deploying our new reimagined product into the market, and growing our loyalty programs,” Christie said during an earnings call earlier this year, expressing optimism about the airline’s efforts to manage its liquidity challenges.

Despite financial difficulties, passenger numbers have shown a modest increase. According to EuroNews, Spirit Airlines saw a 2% rise in passenger miles flown in the first half of this year compared to the same period in 2022. However, the increased demand has not offset the lower average ticket prices, further straining Spirit’s revenue as it navigates one of the most challenging periods in its history.

Spirit’s bankruptcy filing marks a new chapter for the airline as it pursues a complex restructuring process to stabilize its finances.

Source: EuroNews